New Tax Law Signed Dec. 18th- What Does This Mean for Your Business?

The “Protecting Americans from Tax Hikes Act of 2015” was signed into law on December 18, 2015. This tax act extended many of the tax laws that were set to expire in 2015, but none more important for the small business than the 50% bonus depreciation and the electing to expense (Sec. 179) rather than depreciate tangible property purchased in 2015. The Sec. 179 expensing has become permanent part of the Code. The bonus depreciation will be extended through 2019 as part of a phase out.

Some differences between the two laws are the electing to expense new or used tangible property purchased in 2015 is limited to $500,000 and is phased out starting at $2,000,000 of purchased tangible property, which is more than most small businesses need. Electing to write off instead of depreciating tangible property cannot create a tax loss but the loss can be carried forward. The 50% bonus depreciation is for only new tangible property purchased in 2015 and has no limitation or phase out and can create a loss.

Additional $8,000 depreciation for luxury autos and SUV (less than 6,000 lbs) purchased in 2015 and used 100% for business have also been extended under the tax act.

It is important to note, that any tangible property purchase must be placed in service in 2015 to get the tax benefit. If you find yourself buying too much tangible property in the last quarter of the year, electing to expense rather the 50% bonus depreciation in most cases gives you the maximum write-off.

The new repair regulations, where you can write off additional personal tangible property, that have become law last year are an addition to these tax extenders.